But policy shifts proposed by incoming US president Donald Trump were likely to push up inflation in the near term.
"Some indicated policies, such as looser fiscal policy or deregulation efforts, would stimulate aggregate demand and increase inflation in the near term, as spending and investment increase immediately," said IMF chief economist Pierre-Olivier Gourinchas.
"Other policies, such as higher tariffs or immigration curbs, will play out like negative supply shocks, reducing output and adding to price pressures."
Policies like those proposed by Donald Trump are likely to push up inflation in the near team. (Mick Tsikas/AAP PHOTOS)
Global growth is expected to remain steady at 3.3 per cent, although fault lines are widening between countries' economic performances.
A "constellation of risks" could exacerbate these divergences. Concerns about public debt could further constrain sluggish European growth and a sharp decline in Chinese government bond yields speaks to rising investor anxiety.
Australia's economy was predicted to grow at 2.1 per cent in 2025, up from 1.2 per cent in 2024, before expanding by 2.2 per cent in 2026.
Meanwhile the story of US exceptionalism is set to continue.
The IMF upgraded its US GDP growth forecast for 2025 by 0.5 percentage points to 2.7 per cent following Mr Trump's election.
The US has been boosted by vigorous productivity growth, particularly in the technology sector.
Productivity growth has cratered in Australia by contrast.
To avoid getting left in America's wake, Mr Gourinchas recommended economies embark on ambitious structural reforms to directly boost growth.
"These include targeted reforms to better allocate resources, increase government revenues, attract more capital, and foster innovation and competition," he said.
Targeted reforms in labour markets, competition, health care, education and digitalisation would help revive productivity growth and attract capital, the IMF said.
Treasurer Jim Chalmers says the IMF report highlights big risks weighing on the economy. (Darren England/AAP PHOTOS)
Treasurer Jim Chalmers in November established a $900 million fund to spur states and territories to implement productivity-boosting reforms as well as tasking the Productivity Commission with five inquiries to identify further reforms.
Amidst this global uncertainty, Dr Chalmers said the Albanese government had managed to get inflation down while keeping unemployment low.
"This IMF report highlights there are still some big risks weighing on the global economy," he said.
"Conflict, trade tensions and weakness in the Chinese economy are likely to dampen growth around the world in 2025."
A coalition government would risk Australia's economic progress by coming after Medicare, pushing down wages and driving up electricity prices through nuclear energy, Dr Chalmers said.
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